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China’s ByteDance, owner of wildly popular (and often deeply annoying) music app TikTok, has moved to segregate much of the app’s operations from the rest of its business in a bid to convince the U.S. government user data is safe from the prying eyes of Chinese spies, Reuters reported on Wednesday. ByteDance acquired the U.S.-based app Musical.ly in 2017 for a billion dollars, helping TikTok to rapidly acquire hundreds of millions of users. According to Reuters, the company hopes to reassure the Committee on Foreign Investment in the United States (CFIUS) that user data is safe from the Chinese government in order to avoid the fate of Beijing Kunlun Tech Co Ltd, which the committee compelled to agree to divest gay dating app Grindr in May 2019. User data acquired by TikTok would include names, ages, email addresses, phone numbers, location data, account credentials (potentially including reused passwords), and of course any content uploaded to the app. The fear goes, much as it has accumulated around other Chinese-owned corporations that have attracted U.S. scrutiny like Huawei, that due to the lack of privacy protections in China all the nation’s security services need to do is ask and they will suddenly be granted access to all of that information. According to Reuters, a source said that steps ByteDance has taken include separating TikTok’s “product and business development, marketing and legal teams from those of its Chinese social media app Douyin” earlier this year. It also hired a third-party consultant to audit how it handles personal data and reiterated it stores all U.S. user data stateside, as well as stated TikTok content is beyond the jurisdiction of Chinese authorities. Furthermore, it is hiring more U.S. engineers to work on TikTok and creating a data management oversight team in Mountain View, California, sources told Reuters. Reports that ByteDance is the target of a CFIUS national security probe focusing on the Musical.ly acquisition first popped up around the start of November. The U.S. Army, which launched a recruitment campaign via the app, has also launched its own security assessment aimed at determining whether the risks of using the app outweighed the gains. According to Reuters, ByteDance views the CFIUS probe as informal, and sources said that CFIUS has not raised any questions about censorship on the app. One user recently claimed that her account was suspended after she posted a TikTok criticizing the Chinese government’s treatment of Uyghur Muslims—specifically widespread accounts that hundreds of thousands have been or are being processed through concentration camps in Xinjiang—though ByteDance insisted it was because a previous TikTok from the user’s account featured a photo of Osama bin Laden, setting off automated terrorism filters. Source
A Bloomberg report on Monday evening said that ByteDance is considering selling off a majority stake in its incredibly popular and fantastically annoying music app, TikTok, amid intensifying U.S. government concerns that the China-based company is a security and espionage threat. However, the firm has denied the report as “inaccurate” and “meritless.” ByteDance was previously reported to be preparing to wall off TikTok from the rest of its Chinese operations as part of a plan to reassure the powerful Committee on Foreign Investment in the U.S. (CFIUS) that it doesn’t plan on abusing its access to the hundreds of millions of devices it’s installed on worldwide on behalf of China’s security services. The argument goes that all those government agencies need to do is ask, and China-based businesses will be forced to comply, due to both a lack of basic legal protections and sweeping laws consolidating government control over the nation’s domestic internet. Selling off a majority stake in TikTok would significantly assuage those fears, as the Beijing-based ByteDance would no longer have unilateral control. According to Bloomberg, ByteDance’s wariness over the CFIUS issue seems to have continued to grow, with sources saying advisors are “pitching everything from an aggressive legal defense and operational separation for TikTok to sale of a majority stake.” One source said that ByteDance believes it could make well over $10 billion for a majority stake in the app, Bloomberg added. But if a sale proceeds, a source told the news agency, the likeliest scenario is that ByteDance will attempt to protect the value of the app by selling it to company investors like SoftBank, Sequoia Capital, or Susquehanna International Group. ByteDance would obviously prefer not to sell off its crown jewel, according to Bloomberg, and less drastic options remain on the table. Another report in the Wall Street Journal on Monday indicated that ByteDance was looking at creating a headquarters for TikTok, which currently lacks an official one, outside of China. Bloomberg also noted that ByteDance, which did not seek CFIUS pre-approval for its acquisition of the app’s original owner, Shanghai-based Musical.ly, could argue that the committee lacks legal standing to force a divestiture despite its massive userbase in the states and main office in Los Angeles. ByteDance has denied that it has any plans to sell off parts of TikTok, according to Reuters. A company spokesperson told the news agency that there have “been no discussions about any partial or full sale of TikTok” and that “These rumors are completely meritless.” In a separate memo to staff, Reuters wrote, TikTok chief Alex Zhu wrote that “From time to time you may read stories in the media that are not true. Today there is an inaccurate report claiming that ByteDance has considered selling part or all of TikTok... We went on the record saying it was not true, but they decided to publish it anyway. I want to assure you that we have had no discussions with potential buyers of TikTok, nor do we have any intention to.” Source